Measuring iron depreciation
You can't control everything. Mother Nature's constantly driving home that point.
The same's true of crop inputs and the prices you have to pay to get a crop raised. You can control what it costs you for some inputs but not others. And, that's true of not just purchase prices, but things like equipment depreciation, according to a report by Illinois FBFM Association ag economists Bradley Zwilling and Dwight Raab.
"Some input costs seem to easier to control than others. It might seem that the typical crop costs are hard to control. It is difficult to produce a crop without seed, fertilizer, and pesticides...so we try to control the costs of these inputs through early pay/early order discounts and ordering in quantities that allow for additional discounts," the economists say.
So, purchase timing is typically the best way to control costs for things like seed and fertilizer, but what about the bigger-ticket items, like machinery? It all has to deal with how you tally depreciation and how that's weighed in new equipment purchases, according to Zwilling and Raab.
"While we may think of depreciation as an expense that is out of our control; the control of depreciation begins with the purchase of capital assets," they say. "So the control of this expense category lies in the careful planning for purchasing capital assets that matches the using up/wearing out/obsolescence of those assets and best suits the economic need of the farming operation in terms of size and horsepower."